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The eBay’s Troubles in Asian Markets, Research Paper Example

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Research Paper

That Asia represents a virtually limitless opportunity for online retail has not escaped eBay’s attention.  For some years the company, a fixture in American and Western commerce and the leader in open-auction bidding sales, has invested enormous effort and funding into creating an Asian presence just as impressive.  In 2005, for example, eBay invested $100 million to promote its interests in China alone.  The venture, however, failed, as evidenced by the 2006 resignation of eBay’s Chinese unit CEO.  At the same time, eBay was negotiating selling some or all of its stake in China to Tom Group, a wireless-communications service (Mangalindan, 2006).  The eBay corporation is a global giant with a worth exceeding S4.5 billion, yet its efforts to capture an Asian market have consistently missed the mark.

More than one cause is behind this issue, and cultural considerations form part of the answer as to why eBay has faced such difficulties.  It is believed that eBay has struggled to achieve a successful standing in Asian natures simply because it did not comprehend how Asian culture affects retail decision-making.  For example, Chinese CEO Jack Ma’s Taobao site encourages and facilitates instant messaging, email, and photograph exchanges between members conducting sales, whereas eBay relies more on providing anonymity to its members.  In China, Taobao has enjoyed enormous success, while eBay, as noted, suffers, and the cultural factor is clear.  If eBay is a Western giant because Western ideologies promote privacy in retail transactions, even those between ordinary sellers and buyers, it seems Asian consumers prefer a strong element of socialization.  Asians, generally speaking, appear to prefer transacting business of any kind only after some form of social bond is established, just as Americans prefer to employ only pseudonyms in their auction activities (Doole, Lowe, 2008, p. 428).  This is a critical element in online retail, and eBay seems to have entered the Asian arenas with no proper appreciation for how such a cultural difference could impact on online trade.

At the same time, eBay’s timing was particularly bad, in that it ran head-on into a massive and unexpected rival: Gmarket.  As recently as 2004, for example, Internet Auction, the eBay identity in South Korea, was the leader in the online auction industry in the nation.   By 2006, newcomer Gmarket had already surpassed Internet Auction’s mark and was growing rapidly.  This company’s extraordinary growth, which translated to a five-fold increase from 2004 to 2005 alone, is especially troubling for eBay, as Gmarket is partially owned by eBay competitor Yahoo.  Ihlwan, 2006). During these years, eBay fought to maintain at least half of the market, but Gmarket’s strategies remained more potent, and more appealing to Asians.  More exactly, Gmarket created a retail presence combining direct, low-priced sales with auction bids, and also devoted efforts to directly assist vendors in promotions not available with eBay (Ihlwan, 2006). In 2006, an 80 percent jump was calculated for Gmarket’s Korean platform within the next few years, which would virtually reduce eBay to a minor competitor (Ihlwan, 2006).

Given these challenging conditions, it seems eBay developed a response that could safely eliminate them, and directly address the company’s longstanding inability to gain the Asian impact expected:  “In June 2009, eBay Inc. acquired Gmarket for a total cash purchase price of approximately $1.2 billion”  (ebay Inc., 2010).  Very simply, eBay decided to merge with Gmarket, rather than seek to compete against its powerful Asian presence.  At the time of this acquisition, eBay anticipated that the growing Japanese, Korean, and Singapore markets for online retail would expand by 30 percent over the next several years, which would greatly strengthen Gmarket’s position.  Consequently, in absorbing Gmarket, eBay was enabled to both take direct advantage of the established Gmarket presence while encouraging the eBay brand throughout all of Asia.   As Gmarket flourishes today and extends its presence into other Asian markets, eBay benefits both directly and indirectly, in that the ongoing relationship serves to instruct eBay as to appealing to Chinese, Korean, and Japanese buyers and sellers.

References

Doole, Isobel, & Lowe, Robin.  (2008).  International Marketing Strategy: Analysis, Development, and Implementation. Belmont: Cengage Learning. eBay Inc.  (2010).  “eBay and Gmarket Founder Plan Asia Expansion Through Joint Venture.”  Retrieved from http://www.ebayinc.com/content/press_release/20100506007289

Ihlwan, Moon. (2006). “Gmarket Eclipses eBay in Asia.”  Global Economics. Business Week. Retrieved from  http://www.businessweek.com/stories/2006-06-27/gmarket-eclipses-ebay-in-asia

Mangalindan, Mylene.  (2006).  “China May Be eBay’s Latest Challenge As Local Rivals Eat Into Market Share.”  The Wall Street Journal.  Retrieved from http://online.wsj.com/article/SB116061293963989984.html

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